Thai banks see support in regulator's dividend restrictions: Fitch

This will help them maintain necessary resources to support lending activity.

The Bank of Thailand’s capital distribution restrictions announced on 19 June provides further support to Thai banks’ capital buffers, says Fitch Ratings.

This also follows similar responses from other regulators globally amidst economic uncertainties caused by the coronavirus pandemic.

“Similar restrictions on bank dividend payments have been announced in Australia, the eurozone, India, Vietnam, and the UK. Thailand is asking banks to suspend 2020 interim dividend payments and share buybacks, and to prepare capital management plans covering the next one-three years,” Fitch said in a note.

The Thai central bank's decision is linked to its broader policy to ensure credit access and stimulate business activity.

The measures will help the country's banks maintain the necessary resources to support their lending activities, and absorb credit losses, during this economically fraught period, according to Fitch.

The Thai banking sector's average common equity Tier 1 ratio was sound at 15.8% as of April 2020. Thai commercial banks also have strong capital strength, based on capitalisation scores of banks covered by Fitch Ratings.

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